Crane rejects Fletcher offer

Fletcher Building will have to increase its takeover offer for Australian building supply company Crane Group after directors rejected its initial bid, brokers say.

The fact that Fletcher yesterday sought New Zealand anti-trust clearance from the Commerce Commission to acquire the business indicated a determination to complete what was turning into a hostile takeover, Craigs Investment Partners broker Peter McIntyre said.

"It tells me they're getting serious and I think the chance is Fletcher Building may up the ante," he said.

Fletcher Building already owns 14.9% of Crane Group but its $993 million ($A740 million) takeover offer for shares it did not own, made up of one Fletcher share and $4.60 in cash for each Crane share, was rejected as inadequate.

Based on the Australian Stock Exchange share price on the day before the takeover offer was launched, Fletcher's offer was worth $12.55 a share, a 28% premium on Crane Group's one month weighted average price.

Crane Group directors said the offer did not value likely synergy gains from merging the two companies.

Mr McIntyre said Crane Group shares were at a cyclical low and he believed directors were talking up the price.

"Crane Group is trying to tell Fletcher Building there will be asset complementaries and they want Fletcher to pay up."

He doubted Fletcher would lift the cash component of the offer, as that risked over-leveraging its balance sheet, but with a 14.9% stake, it could block any other takeover bid.

"As far as manoeuvring, it's been a pretty slick move by Fletcher."

An analysis by Craigs of the deal calculates the value of merger synergies at $20 million through reduced corporate overheads.

If the bid succeeds, Fletcher's Australian-generated revenue would exceed that of New Zealand, making up 45% of group earnings compared to 42% from New Zealand.

On news the Crane board had rejected the offer, its shares were trading at $A9.38 on the Australian Stock Exchange, while Fletcher Building shares were yesterday up 1c on the New Zealand Stock Exchange to $7.80.


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